To achieve greatness, athletes need to have discipline and an excellent work ethos, but without a crackerjack coach providing direction and encouragement and executing winning plays, even the greatest players can flounder. The all-time great master motivators, like Bill Belichick, Tom Landry, Don Shula and Joe Gibbs, exhibit knowledge and dedication — and are vital to every player's success.
Like a head football coach, players also need an enthusiastic, supportive and trustworthy individual to guide them when it comes to their personal finances, especially as most are overwhelmed with the sport and don't have time to properly manage their money. Unfortunately, although NFL players make an average of $1.9 million a year, a full 15% of them end up declaring bankruptcy.
According to Joe McLean, wealth manager of superstars in the NBA, NFL, PGA, MLB and NASCAR, when it comes to professional athletes, "the commonality is that with great abundance comes less discipline."
McLean is the founder of financial services firm Intersect Capital, which specializes in servicing the unique financial planning needs of business owners, entrepreneurs, athletes and entertainers. The firm manages current contracts worth more than $2 billion for about 50 athletes, including Whitney Mercilus of the Houston Texans, Klay Thompson of the Golden State Warriors, Aaron Gordon and Nikola Vucevic of the Orlando Magic, Hassan Whiteside of the Portland Trail Blazers and pro golfer Sergio Garcia.
"Athletes don't begin their career with the end in mind. Early on in someone's career, they are just figuring out how to get on the field. And the money is coming, but they almost don't have any time to figure that out. They have to live each contract as if it's their last one. But a lot of athletes initially think there's always going to be another contract."
McLean's goal is to ensure that his clients have enough money in the bank so they have the freedom to choose whatever they want to do after retirement.
A four-year NCAA basketball player for the Arizona Wildcats, McLean knows firsthand the pitfalls and challenges athletes face when it comes to managing their money. McLean tried to make it in the NBA but instead went on to play pro ball overseas for a Spanish team. Upon returning to the States, he went to grad school and began working at mutual fund company Franklin Templeton before launching San Ramon, California-based Intersect Capital. After 15 years, a bunch of his old Wildcats teammates came knocking on his door.
"They came to me and said, 'I think you are in that financial world and I'm getting ready to retire. Can you look at my stuff?' These were people that made a lot of money," said McLean. "I had learned over the last 15, 16 years of my career of what people do to traditionally manage their wealth, and I realized none of these guys were doing it. And as I dug deeper, I found no athletes were doing it, because, frankly, they grew up like me and were chasing a dream but they were never chasing the money. They were young people not making great decisions, because they weren't equipped. That's when — bam — the light went off and I launched Intersect Capital," he said.
To become financially secure, McLean requires that all his athletes fill three buckets. "There's a safety and security bucket, which is an entire season's worth of cash to support your fixed costs." If a player owns a home, this strategy includes a plan to pay it off before the end of the contact. Finally, "life insurance or things you have to do to take care of yourself goes in that safety and security bucket," he said.
Once the athlete has filled that, McLean then moves on to the growth bucket. "This teaches people that cash is not king but cash flow is king. How are you going to create income that will come to you when all of these checks stop coming? That may be teaching about diversification and what dividend-paying stocks are, what type of income-producing real estate you can be in, what are tax-free bonds. We start filling that bucket to produce income that they can live off later.
The last bucket, he said, is the dream bucket. "That's typically the second or third car that they shouldn't buy but they can, the second home, or if they want to go out and be an entrepreneur and learn about other businesses."
McLean said the key is for athletes to surround themselves with a support system that's trustworthy and knowledgeable and puts their interests first. "Building a team around you, or a locker room as I say, outside of sports to help make informed financial decisions is critical. Kobe recognized the importance of building a team of professionals outside the locker room no different than the great teams he helped build for the Lakers."
"I'm not afraid to get fired. I'm gonna tell you the truth. And I think all good advisors, to be really good, you have to be willing to get fired sometimes and be brutally honest."
The financial team McLean refers to includes but is not limited to a wealth manager, estate planner, accountant and even possibly a credit manager. "My mantra is to just be all in, in their life, because most of these athletes are 100% all in and trying to be great, so anyone else that comes into their life has to have that same mentality in terms of how they're going to serve them."
McLean points to Houston Texans outside linebacker Whitney Mercilus, who signed on with McLean two years ago. "He didn't know what it cost to be him. He wasn't aware of all the money coming in and all the money going out. He wasn't thinking about beyond himself. Now he's far more equipped and aware of how he gets paid, how he thinks about saving, how he thinks about investing, and he knows that he's gonna now have this freedom of choices by the end of his contract, because he'll be set for life," McLean said.
1. Understand how you get paid. "This varies in every sport. Everyone gets paid differently. Basketball, baseball and hockey are all guaranteed contracts, so I know if you sign a three-year deal, we are going to work off what's guaranteed. In football you get paid over a 16-week season, so that's more difficult to budget because you have to make it last all year. But nothing is guaranteed in football; they can cut you tomorrow. The only thing that's guaranteed is the signing bonus. There are also things called taxes and Social Security and all of these other things that come along that cut your check in half."
2. Make a budget. "We have to choose the percentage of income an athlete is going to live off of before their lifestyle chooses it for them. A minimum of 60 cents of every dollar has to be saved. Then we track it. I pay the bills so that I'm aware and help them be aware of what things should cost. People see how much someone makes and the tailor may charge $6000 for that suit instead of what it should be, at $2000."
3. Be aware of what's going on. "Know what it costs to be you. By this I mean fixed costs and variable costs — your walking around money. Then ask yourself, How can it cost less to be you?"
4. Protect your assets. "Be organized, have a will or a trust so that all of your assets are protected." This is especially important, as professional athletes are natural targets for sometimes frivolous lawsuits, largely because they are, or are perceived to be, holders of large amounts of liquid wealth and earn large amounts of money in relatively short periods of time.
5. Retire with no debt. If you have a home, it's gotta be paid off by the end of the contract. You've got to live each contract as if it's your last one." McLean says that retiring without debt will give every player the freedom to choose whatever they want to do after they transition out of sports.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.